More than 20 years ago, an entrepreneur in Pasadena had a light bulb moment: Could a start-up give away personal computers and Internet access, for free, and subsidize the cost of both through personalized digital advertisements?
The entrepreneur, Bill Gross, decided to go for it. In early 1999, Gross launched Free PC, a company that offered Compaq-built computers and dial-up Internet without cost, at a time when PCs were going for around $800 a pop and online service was sold by the hour. The trade-off? Customers had to agree to use the device at least 10 hours each month, and fork over browsing data, so the company could sell advertisements against their activity.
Free PC generated interest from 1.2 million customers before eMachines, a company that made a budget-line of Internet-connected computers, swooped in and purchased the company. eMachines stopped offering the hardware and online service for free, but continued the data collection for its own benefit. And that was the end of the big free computer experiment.
Fast-forward to today, and another entrepreneur is franchising the free hardware strategy with the goal of giving away hundreds of thousands of Internet-connected televisions that are subsidized through personalized advertisements.
The hardware and the company are called Telly (earlier revealed by tech reporter Janko Roettgers as "Teevee"), and its founder knows a thing or two about the advertising business. Ilya Pozin helped co-found and develop an early iteration of Pluto TV, an ad-supported streaming service that collated YouTube and Hulu videos into a linear television experience similar to cable or satellite. After forging content deals with FilmRise and other third-party TV and film distributors, Pluto TV was sold in 2019 to Viacom for $340 million and is now one of the cornerstones of parent company Paramount Global's ambitious streaming business.
Pozin is bringing that same ambition to Telly, which has operated in stealth mode for the last two years. At the heart of Telly's business is a 55-inch connected TV set that includes an Android TV streaming dongle, an integrated, high-fidelity sound bar and a secondary "smart screen" that sits below the main screen.
That secondary screen has drawn a lot of attention. Executives at Telly say their device is the first to sport a separate screen that can be used for a number of purposes — to show sports-related data for games in progress on the main screen, or to pull up weather and traffic information. And, yes, that second screen will show advertisements, the main subsidizer of the free hardware.
"Telly is a revolutionary step forward for both consumers and advertisers," Pozin said in a statement that accompanied the product's announcement on Monday. "For too long, consumers have not been an equal part of the advertising value exchange. Companies are making billions of dollars from ads served on televisions, yet consumers have historically had to pay for both the TV and the content they watch. All of that changes today."
Don’t be fooled by free
In an interview with Fierce Video on Tuesday, Telly Chief Strategy Officer Dallas Lawrence said consumers shouldn't immediately draw the conclusion that a free Telly is a cheap device compared to budget television sets on the market today.
"Don't be fooled by free," Lawrence said. "This is the most-powerful television ever built. If we sold it on the market today, it would be over $1,000 — it has more power, more technology, more memory, more processing capability than any TV ever delivered."
On paper, the specs of the flagship Telly TV set are impressive: The 55-inch screen is capable of outputting video with ultra-high definition (UHD/4K) resolution and supports high dynamic range, or HDR. Video conferencing is possible on the Telly thanks to an integrated webcam (which can be disabled) and native support for Zoom. The device's operating system — which runs a forked version of Android but is otherwise proprietary to Telly — will be updated once or twice a month.
An integrated over-the-air tuner allows Telly users to watch free broadcast TV without a separate subscription, and the device comes with three HDMI ports for streaming dongles, game consoles, computers or other hardware. The Telly operating system doesn't have an app store, so it doesn't offer native access to streaming services like Netflix or Disney Plus; instead, Telly ships with an Android TV dongle that can be used for that purpose, or streamers can bring another device like a Roku, Apple TV, Android TV or similar hardware.
By not building a streaming platform into the Telly, Lawrence said the company is deliberately not participating in the so-called "streaming wars," and instead positions itself as a company that builds television hardware and software that plays nicely with others.
"The thing about Telly is, we're not really a hardware company," Lawrence said. "We're a software and advertising company...that's a completely different mindset than every other TV manufacturer today."
Well, sort of. Other TV hardware makers have caught on to the idea that their connected TV platform business is quickly outpacing hardware sales, at a time when customers are more likely to spend a decent amount on a TV set that they intend to keep for a longer period of time. Vizio, for instance, has reported flat hardware sales over the last several financial quarters; meanwhile, the company's platform business, which is largely fueled by advertising, has grown by double-digit percents at a pretty steady pace. Roku, which announced months ago that it would start building its own TV hardware, has experienced a similar trend.
That second screen
What separates Telly from the bunch is that audacious decision to relegate ads to a secondary screen that is part of the main device. That secondary screen — patent pending, Lawrence affirmed — has gotten the lion's share of attention in the two days since Telly was announced. Since the announcement, social media has been flooded with comments about the ad placement on the second screen, and some are already concocting ways to hack the device in order to disable ads or turn the screen off.
Lawrence said Telly isn't worried about customers disabling the screen, because it exists as a utility as much as it does a digital billboard. For instance, when a viewer changes the volume on the Telly, the volume bar is shown on the second screen instead of as an overlay on the main display. Streamers who do manage to disable the second screen might find parts of the Telly no longer function as intended.
Others have expressed concern that a constant barrage of advertisements on the second screen will ruin the television viewing experience — no one wants to be fully immersed in a pivotal moment of their favorite drama or movie, only to have the tension broken by an UberEats ad.
Lawrence said Telly's development team thought of that, too. "The second screen recesses, and goes into consumption mode, it dims, and by design, it's meant to not distract during the experience on the main screen," he affirmed. If a streamer pauses the action, the secondary screen springs back to life.
Telly has a plan for streamers who like to watch content at night as well: Lawrence said the company is working with brands to create evening-specific advertisements that don't use flashy graphics or bright colors, so as not to distract streamers who might be watching content in a dim room or before bedtime.
"We're really thinking about the ad experience, which needs to be additive and complements the TV, but doesn't take it over," Lawrence said. "That's why I say Telly is really the first truly smart television to be introduced to the market."
And Telly is also one of the first brands to tell customers the trade-off up front. Lawrence said the company collects the same type of anonymized data as competing hardware makers, but the difference is the viewer is compensated for that collection.
That compensation goes beyond free TV hardware: Lawrence said the company is also developing a rewards program that will offer gift cards and other perks to Telly hardware users who engage with advertising, polls and other features. The perk, called Telly Rewards, is slated to launch this summer.
Telly has a goal of shipping 500,000 free TVs this year, with customers asked to fill out an online form if they want to receive one. Since the form launched, Lawrence said the company has seen an "overwhelming" amount of interest, but declined to provide specifics on how many had filled out the form
"Shipping 500,000 TVs, though, that's not going to be a problem," he affirmed.